This piece was originally written for Encima Global.
Today’s Labor Department survey of business establishments showed total payrolls up 171,000 in October, well above the consensus. Revisions added 84,000 to August and September. The household survey found 410,000 net new jobs in October following 873,000 gains in September. Workers saying they worked part-time for economic reasons declined by 269,000 in October after rising 582,000 in September.
- The number of full-time workers has risen only 169,000 since March and is 6.4 million below the November 2007 peak. Despite the decline in today’s data, part-time workers have risen 963,000 since March and are up 3.1 million from November 2007 in part reflecting the high cost of health-care benefits for full-time workers.
- Unemployment rose to 7.9% from 7.8% in September. The labor force rose 578,000 versus the 410,000 gain in jobs. This still leaves the participation rate at ￼￼63.8%, near the deep low of 63.5% in August. The underemployment rate declined 0.1% to 14.6% but leaves 23.0 million people still under-employed.
- In each of the last three Septembers, the household survey has shown very strong gains in jobs that are “part-time for economic reasons”: 579,000 in 2010, 483,000 in 2011 and 582,000 in 2012. This has been partly reversed by losses in October: 419,000 in 2010, 480,000 in 2011 and 269,000 in 2012.
- The data has been adjusted for seasonality (looks like over-adjusted), with the statisticians adding jobs in September: 579,000 in 2010, 546,000 in 2011 and 314,000 in 2012; and subtracting jobs in October: 199,000 in 2010, 197,000 in 2011 and 29,000 in 2012. Compared to 2011, the addition for seasonality in September 2012 was reduced by 232,000 and the subtraction for October was reduced by 168,000, meaning a combined September-October addition to jobs of 64,000 from the seasonal adjustments on part-time for economic reasons. We think that is within the normal statistical variations for these surveys.
- The average duration of unemployment rose to 40.2 weeks, threatening to make a new high. The concern is that after a long period of unemployment, job skills erode making reemployment more difficult.
Weakness in Hours, Earnings and Income
- Average weekly hours worked fell 0.1 hours to 33.6 hours for production and non- supervisory workers while average pay fell $0.01 to $19.79, reflecting the wage pressure on the middle class. The decline in hours worked (the surveys occurred before the hurricane) suggests continued weakness in real GDP in the fourth quarter.
- October payrolls (workers times hours times pay) rose 0.1% from September in nominal terms. This is even weaker than the 0.4% increase in nominal personal income in September (which left a 0.02% decline in real income.)
- Real disposable personal income per capita, a measure of well-being, fell 0.1% in September to $32,721 in 2005 dollars. Today’s data suggests that trend continued in October.
- With many year-end taxes likely to go up and the Fed pursuing a contractionary monetary policy, we expect real median household incomes to continue contracting into 2013, pointing toward a recession under current economic policies.
- The establishment survey with the upward benchmark adjustment shows 2.1 million net new jobs over the last year versus 2.9 million in the household survey.
- Private sector establishment payrolls have risen 2.1 million including the benchmark adjustment, versus a 1.8 million 12-month gain in the ADP survey. Bottom line: Across the various surveys, the labor environment is showing slow gains, with trend unemployment falling gradually from high levels but incomes remaining weak.
David Malpass is President of Encima Global and Chairman of GrowPac.com’s Stop the Fed campaign.